Why chroot is considered insecure?

Because, in most instances, a root process can easily exit the chroot. This is by design, as chroot was never intended as a security device.

Alan Cox somewhat famously berated a developer that submitted a kernel patch to "fix" this behavior, claiming that chroot has been abused as a security device, but was never intended to be one.

I know at least one example of why it is considered to be insecure. A chroot environment /proc isn't isolated, so it's fairly easy to access resources not owned by processes started in your chroot.

Using a chrooted enviroment for SFTP is fine and improves the level of security significantly. Just don't abuse it as container-based virtualization, which does provide more levels of security. In this, I underline what's in @MDMarra's answer.